The Chancellor must find an extra £100 million in the budget for the state pension after a review of key figures

The State Pensions Bill is set to increase by an extra £100 million after changing the key earnings figure on which payments depend from April next year.

Older people can now see their basic flat-rate State Pension increase by £475, to around £11,975 a year.

That's around £15 a year more than last month's projected state pensions increase, but enough to cause an additional headache for Chancellor Rachel Reeves ahead of the October 30 Budget.

This would raise the weekly rate from the current £221.20 to an estimated £230.25 from next spring for those retiring from April 2016 and eligible for the full State Pension.

People who retired before April 2016 on the old basic rate of the State Pension now receive £169.50 a week, or around £8,800 a year.

The newly revised rate for next year would mean an amount of £176.45 a week, or around £9,175 a year.

People on the lower basic rate also get big top-ups, called S2P or Serps, provided they were earned earlier in life. However, they are raised in line with inflation and not with the triple lock.

The triple lock means that the state pension is increased each year by the highest of two values: inflation, average wage growth or 2.5%.

The reason for the small but expensive increase in next year's State Pension is that the crisis-period earnings growth used in the triple-lockdown calculations was originally estimated to be 4%.

However, in new data published this morning, the Office for National Statistics has re-estimated this figure at 4.1%.

Wage growth data is almost certain to be used to determine the triple lock in the spring.

This is because the corresponding inflation figure, which will be released tomorrow, is expected to be much lower. Last month it was 2.2 percent.

The new government promised to maintain a triple lock for the entire current parliament during the elections.

“The slightly higher rate of increase is welcome for pensioners, although it will represent an unwelcome extra £100 million for the Chancellor as she prepares the Budget,” says Steve Webb, former Pensions Secretary and now Money magazine's pensions columnist.

Webb, who is also a partner at consultancy LCP, added: “The rate of the new state pension will now be close to £12,000 a year, which is very close to the tax-free allowance of £12,570.

“This is likely to put additional pressure on the Chancellor to take action on tax relief in the coming years.”

Personal allowance of £12,570 is the level at which income tax starts and is frozen from 2021.

This creates an anomalous situation where the Department for Work and Pensions pays millions of people a state pension, part of which is then collected by the Treasury in the form of income tax, potentially forcing more and more people to submit their annual tax returns to HMRC.

Millions of pensioners already do this because they receive a State Pension of more than £12,570.

This is because they reached state pension age under the old pre-2016 system and earned enough of the State Second Pension, also known as Serps, to accrue more generous pension benefits.

Meanwhile, a growing number of retirees, who receive even modest income from private pensions on top of their state pension, also have to complete a tax return.

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